          
          
          
                                 Valuation
          
               In some jurisdictions residential properties are
          valued by replacement cost rather than market value, as
          described below for business properties.
          
               Business properties are valued differently from
          residential homes.  The most common valuation method
          for business property is probably the replacement cost
          approach.  The assessor decides how much the materials
          and labor to rebuild your building will cost, and fixes
          that as the market value.  This is easy for the
          assessor to do.  He doesn't even have to leave the
          office in many cases.  But it is also easy for you to
          challenge the estimates by simply getting figures from
          contractors or from people who have recently
          constructed buildings similar to yours.
          
               Another approach used to value business properties
          is capitalization of net income.  The assessor
          determines the net income, then chooses a
          capitalization rate, or fair rate of return, for the
          business.  This is multiplied by the net income to
          arrive at the property's market value.  Business buyers
          and analysts often use this method to determine how
          much to pay for a business.  The key is to select the
          right capitalization rate for that particular industry. 
          Several reference books available in public libraries
          and brokerage firms give average capitalization rates
          for most lines of business.
          
               Professional appraisers are, of course, available
          to determine market value for a fee.  Owners of
          residential properties and small business properties
          probably won't find the cost worthwhile.  But owners of
          larger properties will find that having one or even two
          professional appraisals in hand is a good idea.  If you
          have recently purchased the property, there may be a
          recent appraisal done for the mortgage holder that you
          can get a copy of.
          
               Some jurisdictions officially assess on a fraction
          of fair market value, and some on 100%.  Which method
          is used is irrelevant -- what matters to you is the
          consistency of valuation for similar properties.  The
          resulting fraction is called the assessment ratio.  All
          of the taxable property in the district is then
          totalled up on a list called the tax roll.  With this
          total valuation in hand, the various local taxing
          entities (city, county, school board, etc.) can
          determine how much money a particular rate will raise. 
          The budget is then simply divided across all of the
          properties to establish the tax rate.
          
               The appraisal process to arrive at this assessment
          total varies considerably in different jurisdictions. 
          Some appraise all properties annually.  Some appraise
          on a rotating schedule so that each property is
          physically inspected every second or third year.  Some
          never leave the office and assume that they have caught
          all changes by checking the building permit files for
          improvements.  Some arbitrarily add an inflation factor
          to the last appraisal, which also doesn't require a
          trip out of the office.
          
          
          
